'In MENA, lower oil prices are focusing minds on renewable energy'

5 MINUTES with Mohammed Atif of DNV GL and MESIA

Optimism about the future of solar PV development in the Middle East and North Africa (MENA) is now higher than ever.

Last week, on the sidelines of the World Future Energy Summit 2016 in Abu Dhabi, the Middle East Solar Industry Association (MESIA) released a report describing MENA as a 5GW solar market in 2016. It sees Egypt as the region’s biggest centre of development in the coming year, with roughly 1.5GW of PV capacity scheduled to go into construction.

Recharge spoke with Mohammed Atif — a MESIA member and area manager for the Middle East and Africa at DNV GL — about his thoughts on the sunny outlook for MENA this year.

What were your main takeaways for solar at WFES?

In general, my company and I are very, very positive on the outlook for the solar industry in the Middle East and North African region.

It has taken a bit of time to come, but because we are at the very early stages of involvement in the policy and measurement campaigns – in scoping – we have a very good feel for how fast the industry is likely to move in the next one to two years.

And in Iran [with] sanctions lifted, it’s a whole new ball game. In general, the MENA region is a really, really exciting place to be in solar for the next few years.

What are the main factors driving development throughout the region?

They’re different and they’re the same [throughout the region], which is quite exciting and surprising.

Saudi Arabia is suffering from significantly lower oil revenues because of the lower oil price. Yet they are accelerating their renewables programme.

So the lower oil price has not derailed the renewables programme, but it has focused their minds, because they’re thinking more long term. They want to diversify. They want to push for industrial transformation, increase employment, increase their own manufacturing and export capacity of renewables.

So the lower oil price is really pushing that to a head. They’re saying “we no longer want to be as exposed to such market volatility as we are now, because it disturbs us”.

Now if we take another country, like Egypt or Jordan, with relatively scarcer hydro-carbon accessibility and dependency on imports, it’s more of the same. They don’t like being exposed to oil-price volatility.

The price has now come down, [and] it benefits them, perhaps. It improves their budget position, because they may have been expecting significantly higher expenditure on [imports]. So from their perspective, it’s “let’s accelerate our renewables programmes whilst we can”.

Because it’s likely that after a couple of years of low oil prices, when all the pundits and all the world experts and all the big investment banks start saying together that “yes, we’re in a low oil-price world for eternity”, normally what happens is that they’re wrong and the oil price goes up again. 

So I think there is a real maturity amongst the policymakers. Youth employment, industrialisation, and exposure to resource-price volatility is helping to drive the change.

Saudi Arabia is obviously a huge potential market, but so far at the policy level progress has arguably been slower than some in the region would hope. What needs to change to really drive growth?

First and foremost I think the change in political leadership to a new, younger generation has happened. We’re aware of it at the ground level. We can see the change. Secondly, the lower oil price has clearly focused minds.

And third, it was perhaps a timing issue. A lot of people have a misconception that when the King Abdullah City for Atomic and Renewable Energy (KA CARE) announced its renewables targets, that this was a renewables programme.

Actually, the KA CARE programme is significantly more than that. It was a programme for industrial transformation on a national scale. What we have now in Saudi Arabia, over the last few years, is far more industrial capacity to benefit from such a move.

You have companies like ACWA Power, and other massive conglomerates that are investing in European and North African markets in order to build up their capacity. So when the renewables boom comes in Saudi Arabia, there is much more of an economic-multiplier effect.

In my view, from a long-term planning perspective — if I just look at it from a long-term, logical, policy perspective — there is some logic to there being a much slower build-up in the renewables programme, in order to allow this industrial capacity to develop within the country.

So I think they’re far more [advanced] and ready to take this forward. I think we’re going to see some nice pilot-type projects, utility-scale projects in 2016. In 2017, I think it will accelerate. In 2018, I think we’ll be well into a huge national boom there. 

What are some of the key obstacles to development throughout the region?

In Iran [after the lifting of sanctions] clearly the impediments are that it will take time for their banking system to get up and running. It will take time to reestablish links. But a country of about 80 million people, with quite an educated workforce — it clearly has huge potential.

In general, I think there just needs to be more confidence in the geopolitics of the region. I think that is a factor. And other issues such as currency convertibility in Egypt, because if there are significant currency risks, then access to foreign finance becomes difficult. 

So in general, a more geopolitically stable region would help. More established regulations would help. And more transparent, private-sector participation models in each of the countries in the region would also help to expand the interest in investing in and developing renewables throughout the region.

Where are the main opportunities throughout the region for foreign investors and developers? Where is foreign expertise particularly needed?

I think in Iran, definitely, developers and financiers could play a role as long as the environment is conducive. Saudi Arabia will be very welcoming to foreign investment. Egypt definitely needs foreign investment. Jordan needs foreign investment, expertise and sources of financing. This would help to diversify the base from which the renewables programme could continue to develop. 

How does PV stack up against other renewables such as wind throughout the MENA region?

The resource accessibility — the solar hours, the radiation — is ubiquitous in this region. And the land and the resource availability match quite well. The rate at which performance and development of solar is progressing, and the rate at which the cost per kilowatt-hour is coming down, the trajectory is quite amazing.

It seems to me that the modularity of PV and the ease at which — relatively speaking — one can incorporate micro-grids and energy storage technologies is also really driving [its] use.

There have been some industrial applications. For example, DNV GL recently advised [a company] in southern Africa… to help them use a PV/storage/micro-grid solution to power a gold mine, rather than having to rely on liquid fuel, etc.

There are some very nice corridors of wind, in the UAE, in Jordan and Egypt, so it’s not like it’s just solar. And there are hundreds of megawatts of wind development going forward in the Gulf of Suez area. In Saudi Arabia, more towards the Aqaba area… wind does have a role. In Oman, there area some areas with lovely wind resources — six, seven metres per second.

Note: This interview has been edited for the 5 Minutes format from a longer discussion